Piggy Banking and Unlimited Government Church

A reader asks what I mean by "piggy bank" in reference to a central bank. What I mean is that the central bank, instead of buying safe securities in order to expand the money supply, buys risky securities in order to improve the health of particular financial institutions. For the favored private-sector banks, the central bank is being used as a piggy bank. [UPDATE: John Taylor makes the piggy-bank accusation, but without using that term.]

Another Kling-ism which I can explain more clearly is the Church of Unlimited Government. The central issue is what you do when you notice many other people doing something that bothers you. If you believe that government should address the issue, then you belong to the Church of Unlimited Government.

An example of something that people do that bothers me for which I want government involvement would be murder. Pollution is another example, although I recognize that there are sometimes private-sector solutions.

An example of something that people do that bothers me for which I do not want government involvement is driving on congested roads. I would rather that roads be privatized, with electronic toll collection.

An example of something other people do that bothers me a lot is taking bulky carry-on luggage on planes. I think that a private-sector solution of charging for carry-ons is wonderful. The irony is that some people belonging to the Church of Unlimited Government are so disturbed by the private-sector solution that they want to outlaw it.

Because there are many examples of things that people do that bother me for which I do not want government involvement, I am in the Church of Limited Government. My claim is that most people are not in that church. For most people, not wanting government involvement usually comes from not minding the behavior.

Thus, if you do not want government jailing people for smoking marijuana because you do not mind other people smoking marijuana, that does not put you in the Church of Limited Government. You can be in the Church of Limited Government on principled grounds (the right of individuals to do what they want with their own bodies) or on pragmatic grounds (you don't necessarily respect the right of individuals to do what they want with their own bodies, but you think that the cost-benefit calculation of enforcing marijuana laws is adverse). But I think that very few people actually belong to the Church of Limited Government nowadays. We live in crowded communities, near lots of people who we can observe or imagine doing things that disturb us, and we derive a lot of comfort from our faith in government to control those behaviors.

Suppose that every time the behavior of others really disturbs you, a government solution seems appropriate. Implicitly, you are fairly confident in the moral right of the state to "correct" individual choices and market outcomes and in the ability of the state to do so wisely. In that case, I would argue that there are no limits to the powers that you want government to exercise over others. You are in the Church of Unlimited Government. I think that most Americans are in that Church, and that it is the established Church in our schools and universities.

Comments and Sharing

Perhaps being a libertarian, you are not sympathetic to the conservative alternative.

There is a third "church," the Church of Social Norms and Traditions. In many societies, it functions has an alternative to government.

There are many externalities in crowded societies that were internalized by social norms, embodied in traditions, which restrained undesirable behavior. It used to be considered unacceptable to, say, curse loudly and publicly or play loud music at 3am or litter. Social pressure took care of such matters. Those who behaved boorishly paid a social cost, e.g., no friends, no invitations, no good jobs, without government coercion or taxes. The Church of Social Norms recognizes a distinction between liberty and license. I am not sure that the Church of Libertarianism makes that distinction.

I think part of the financial crisis came from the end of the Church of Social Norms and Traditions. In older "white glove" days, finance people who were amoral, short-sighted, and greedy were excluded from the networks and clubs that dominated banking and finance. That world is long gone, and Wall Street was ruled by sociopaths. We saw the consequences.

I argue that the decline in social norms and traditions is largely responsible for the rise in the Church of Unlimited Government. When a society ceased to be civil, push came to shove.

As for Wall Street, the absence of social norms means government bureaucracies will move in. Get used to it.

It is true, however, that most libertarians are relatively socially laissez faire in addition to being laissez faire on policy matters. Still, everything Kling said is perfectly in line with norms and traditions. It's government coercion that's needed to squash traditions.

Who remembers an old phrase that signaled the rise of Unlimited Government Church: There oughta be a law! Now there are more laws than anyone knows what to do with. Funny, for all the things I would like people to (have the right to) do that government does now, I liked the idea of governments being responsible for roads. But I also saw no problem with one old time solution that some can hardly believe; to require citizens of small communities to bear some responsibility for their roads.

An example of something that people do that bothers me for which I do not want government involvement is driving on congested roads. I would rather that roads be privatized, with electronic toll collection.

Amazing how you could see this as other than government involvement. Perhaps you should just call it the Church of Kling since this only caters to your own ideas of what interventions are permissible.

James Hamilton points out the same "piggy bank" actions in his article "Concerns about the Fed's New Balance Sheet" (http://www.econbrowser.com/archives/2009/07/concerns_about_1.html).

"The Fed was using these [repo] operations not for the traditional purpose of temporarily adding to the supply of reserve deposits, but instead was hoping for some benefits from the collateral side of the operation itself..."

"The purpose of the Term Auction Facility was thus not to get additional reserves into the banking system, but instead to support the value of the assets accepted as collateral and the institutions that held these assets."

The whole article is in "The Road Ahead for the Fed" (edited by John Taylor) which I thought was a good book/anthology. The sole reviewer on Amazon seems less impressed.

The central issue is what you do when you notice many other people doing something that bothers you. If you believe that government should address the issue, then you belong to the Church of Unlimited Government.

That's closer to a better definition. But,

An example of something that people do that bothers me for which I want government involvement would be murder.

here's the rub. How can we decide which things it is, and is not, okay for the government to get involved in?

I think that most Americans are in that Church, and that it is the established Church in our schools and universities.

Nonetheless, I agee with you. The average American's tolerance for behaviors they disagree with is pretty low, and our educational system does less than nothing to improve the matter.

Although, I'm not sure this situation was really ever any different in the US. Intolerance is the default state. The thing that may be different today -- if in fact anything is really different on this whole matter -- is more along the lines of institutional corrosion. We've got just enough centuries under our belt, to have accumulated a whole constellation of Laws of Intolerance. Along with another constellation of Laws To Protect Position (if you ever claw your way up near the top of the economic ladder, the typical person's very next concern is making sure they stay there and the best way to do that, is pass laws that prevent others from competing with you).

All nations in history have accumulated these two catagories of debris as they've aged (and yes the contents of these catagories do shift over time, but the US may have had less content in both boxes when it was younger). There are probably other similar catagories that aren't coming to mind just now.

If you're trying to give this Church issue better definition, it might come out better if you tried casting it in terms like Laws of Intolerance (a term I made up just now). Though the thorny issue of what to leave in and what to leave out, remains.

But isn't this definition we're talking about, the central issue in defining both the classical liberal and the modern libertarian positions? And that does matter.

I argue that the decline in social norms and traditions is largely responsible for the rise in the Church of Unlimited Government.

I don't think so.

Who are the people that are pushing hardest to get the government to "do something"? The very same people amongst whom these social norms and traditions you speak of, are most deeply ingrained.

It matters not if we're talking about the old, as in the Christian church, or the new as in the modern Religious Left. It's the most extreme elements of both Right and Left, who are pushing hardest for Arnold's Church of Unlimited Government. In fact, it is the Religious Right and Left who have taught all the rest of us that Laws of Intolerance should be the norm.

Today is not the first day in American history that someone came along and wanted to pass laws imposing their views and sensibilities on everybody else. People who wanted to do this were around before the American Revolution was ever fought.

What may be different today, is that our political institutions have devolved to the point that it's just a whole lot easier to get such laws passed, even in the face of majority opposition, than it ever was in the past (example: everything the Democrats seem to be up to since Obama boy got in the White House).

In older "white glove" days, finance people who were amoral, short-sighted, and greedy were excluded from the networks and clubs that dominated banking and finance.

You're dreaming. Those "white glove" networks were and are, at least as often as not, designed to give an aura of respectability to groups, organizations,and professions, where in fact a lot of dirt was done in the course of "business as usual".

Human nature hasn't changed in many thousands of years. It remains true today as always, that you could be a complete scum and yet be well accepted by these "white glove" networks, for the simple reason that people find you socially engaging, entertaining, and/or enamoring. You could be a scum but if you've always got a good joke at the ready, lots of people are probably going to like and accept you anyway.

I don't agree that people at large have somehow become less moral today than they were in the past. I would agree that if "The American Experiment" has proven anything of substance, it's that those of us who just want to be left the hell alone to live our lives in peace, are the ones who are bound to loose in the long run.

If you want to prevail in society, you need to have an Agenda to push. "Don't Tread On Me" doesn't seem to be much of an Agenda.

It's those of us who just want to be left alone that are most urgently needed in Washington D.C. today. But we're the ones who are least likely to have any desire at all to ever go there.

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